Is there any hope in stabilizing Vietnam's banking system?

Check out what Standard & Poor's has to say.

According to Ivan Tan, Director of Financial Institutions Ratings at Standard & Poor's, the government will pursue a combination of measures to address bad debt and strengthen the banking system.

He adds:

Short term measures could include direct government recapitalization or the establishment of an asset management company to buy up distressed loans.

However, these do not address the underlying poor underwriting standards and fragmented nature of the banking system. A direct government bailout also raises moral hazard issues.

We believe that lasting financial strengthening will likely be realized through proper execution of the government’s banking reform plans and successful consolidation of the banking system, with the objective of having fewer but stronger financial institutions with good risk controls.

In particular, greater participation by foreign strategic stakeholders will facilitate the transfer of best practices and risk management processes to the domestic banks

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